St. Jude Medical (STJ) reported lower quarterly earnings this morning, but the stock was up around 2% by today's close. Despite the drop in earnings, there are numerous reasons to be excited about this stock.
First, the basics: St. Jude Medical, Inc. develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. It operates in four segments: Cardiac Rhythm Management, Cardiovascular, Atrial Fibrillation, and Neuromodulation. The Cardiac Rhythm Management segment offers products for cardiac arrhythmias, or irregular heart beats. Its products include tachycardia implantable cardioverter defibrillator systems to provide therapy to patients suffering from lethal heart conditions, such as sudden cardiac arrest; cardiac resynchronization therapy devices to treat heart failure patients; pacemakers to help people whose hearts beat too slowly or who suffer from other cardiac arrhythmias; and leads, which connect devices to the heart and carry the electrical impulses to the heart and information from the heart to the device.
10 reasons to own STJ at $47:
- St. Jude sells for around 14.5 times this year’s projected earnings and less than 12.5 times 2012’s consensus EPS, far below its historical valuation.
- It is also selling at the bottom of its five year valuation range based on P/S, P/B and P/CF.
- St. Jude has a very solid track record of growing earnings and revenues over the last five years despite the financial crisis. It has averaged 12 sales growth and 16% growth in EPS over the past half decade.
- Despite this consistent growth it has a low beta of less than .7 and a projected five year PEG of less than 1.2. It is also projected to grow EPS by 11% annually over the next three years, according to S&P.
- It has a rock solid A rated balance sheet and pays a 1.8% dividend yield.
- St. Jude is a great play on international growth. STJ now gets over 50% of its revenue growth from overseas and international sales are growing 23% annually as of its last earnings report. As developing markets get richer, the market for its medical devices should continue to expand.
- It looks like it has good short technical support level at around $46 (See chart).
- Its atrial fibrillation area is showing solid growth at over 18% a year.
- Gross margins should improve due to its AGA Medical acquisition that should result in a better product mix.
- Analysts’ have price targets on STJ that are higher than the current $47 a share it is trading at. S&P is at $57 as is RW Baird. Jefferies is at $59 on St. Jude. BUY
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STJ over the next 72 hours.